Recent Tax Highlights: Key Developments Uncovered
The tax landscape continues its dynamic evolution, with significant actions and clarifications shaping the environment for businesses and taxpayers. Here's a roundup of recent noteworthy events:
-
GST Fraud Uncovered: The Directorate General of GST Intelligence (DGGI), Visakhapatnam Zonal Unit, dismantled a significant fake Input Tax Credit (ITC) network on December 22, 2025. The operation detected irregular ITC amounting to a staggering ₹27.07 crore and led to the arrest of a prime suspect.
-
Urban Company Faces Large Tax Demand: Maharashtra's Goods and Services Tax (GST) authorities issued a tax demand and penalty notice of ₹56.4 crore to Urban Company on December 23, 2025. The notice alleges non-payment of GST on specific service categories facilitated via its platform between April 2021 and March 2025.
-
GSTAT Revokes Staggered Appeal Filing Mandate: In a significant move, the Goods and Services Tax Appellate Tribunal (GSTAT) revoked its earlier order dated September 24, 2025, which had mandated the staggered filing of appeals under Section 112 of the CGST Act, 2017. This revocation, effective from December 18, 2025, aims to ensure unhindered access for taxpayers while maintaining system efficiency.
-
GST 2.0 Boosts Economy: A report published by Rubix Data Sciences on December 23, 2025, highlights the positive impact of India's tax reforms under GST 2.0. The reforms significantly contributed to supporting domestic consumption and overall economic growth throughout 2025, effectively mitigating global trade disruptions.
CBIC Corner: Essential Circulars & Notifications
Stay informed with the latest directives from the Central Board of Indirect Taxes and Customs (CBIC), crucial for compliance and operational clarity:
-
Customs Consolidation: Notification No. 45/2025-Customs, dated October 24, 2025, has consolidated 31 customs exemption notifications into a single, streamlined framework, effective from November 1, 2025.
-
Exemption Clarification: Notification No. 38/2025-Customs, dated September 17, 2025, amended Notification No. 29/2025-Customs to clarify the exemption of specified imported goods from customs duty and integrated tax under certain conditions.
-
CGST Rules Amendment: Notification No. 11/2025–Central Tax, dated March 27, 2025, notified the Central Goods and Services Tax (Second Amendment) Rules, 2025.
-
GST Council Recommendations: Further notifications have been issued concerning GST rates and classification of goods, based on the recommendations of the 55th GST Council meeting.
-
Export Entry Regulations: Circular No. 11/2025-Customs, dated April 3, 2025, details the implementation of the Export Entry (Post export conversion in relation to instrument-based scheme) Regulations, 2025.
-
GST Registration Guidelines: Instruction No. 03/2025-GST, dated April 17, 2025, provides comprehensive guidelines for officers processing GST registration applications.
-
Compliance & Clarifications: Several circulars address various GST compliance aspects, including mandatory furnishing of correct information for inter-State supplies, treatment of ineligible/blocked Input Tax Credit, GST on services by restaurants through e-commerce operators, and clarifications on GST rates and exemptions for certain services.
-
Procedural Reliefs: Clarifications provided regarding late fees for delays in furnishing FORM GSTR-9C and the procedure for departmental appeals concerning interest and/or penalty related to Section 128A of the CGST Act, 2017.
Landmark Judgment: Residential Dwelling Exemption Clarified
In a significant ruling, the Supreme Court in State of Karnataka v. Taghar Vasudeva Ambrish, [2025] 181 taxmann.com 199 (SC), dated December 4, 2025, has clarified the scope of GST exemption for residential dwellings.
The case involved a co-owned residential building leased to a company that subsequently sub-let rooms as hostels for long-term stays to students and working professionals. The key question was whether such property qualified as a 'residential dwelling' for exemption under Entry 13 of Notification No. 9/2017- Integrated Tax (Rate).
The Supreme Court upheld that the property qualified as a residential dwelling, as the accommodation was for long-term stays (3 to 12 months) and municipal records reflected its residential nature. Crucially, the Court ruled that the condition of 'use as residence' was satisfied by the sub-lessees (students and working professionals), making the exemption activity-specific rather than person-specific. Therefore, the exemption could not be denied for the period before the amendment to Entry 13.
The Court emphasized that the amendment to Notification No. 9/2017-IGST (Rate), which took effect from July 18, 2022, to deny exemption when residential dwellings are rented to registered persons, is prospective in operation. Retrospective denial of the exemption for the pre-amendment period under the unamended Entry 13 was deemed impermissible.
This judgment provides much-needed clarity for property owners and aggregators operating residential accommodations, particularly for periods before the amendment. However, it's vital to note that post-July 18, 2022, the exemption is generally unavailable if the residential dwelling is rented to a registered person, with specific exceptions added from January 1, 2023, for proprietors renting in a personal capacity for their own residence.